The Quiet Winners of the Iran War

The U.S.-Israel war on Iran, now entering its second month, has produced no shortage of declared victors. Washington points to Khamenei's death and Iran's gutted navy. Tehran points to $126 oil and a closed Strait. Both miss the bigger picture. The war's most consequential economic beneficiaries are three parties that have not fired a single shot: Russia, China, and Wall Street's defense sector.

This piece looks at the economic mechanics behind each party's gain and what it means for the global macro outlook.

Before the Iran crisis, Russia's energy revenues were in freefall. Oil export earnings had fallen below $10 billion in February, and the Kremlin was reportedly preparing 10% cuts to all non-security spending. The war erased that problem overnight.²

According to the KSE Institute, Russia could receive $45 billion to $151 billion in additional budget revenues in 2026, depending on the conflict's duration. In the pessimistic scenario, where fighting continues through September, total additional energy windfall across all sources reaches roughly $252 billion.³, ⁴ The three KSE scenarios are modeled below.

The strategic upside runs deeper than the cash. A U.S. consumed by the Middle East frees Russia to consolidate its sphere of influence in Europe while pursuing maximalist demands in Ukraine, with additional energy revenues providing the financial means to open new fronts, hybrid or otherwise. Moscow's silence has been its most strategic move: it is letting Washington exhaust itself, then cashing the check.²

China's position is more complex but ultimately opportunistic. The country imports roughly 40% of its oil through the Strait of Hormuz. It had stockpiled crude before the war, giving it approximately 1.39 billion barrels in strategic reserves, roughly 120 days of net imports at current rates.⁵ That buffer bought time.⁶

China is also better positioned than most because Russia continues to supply roughly 2.1 million barrels per day through a combination of pipeline and seaborne routes, largely unaffected by the Strait closure.⁵ Iran has reportedly allowed Chinese vessels to pass through while blocking other commercial shipping.⁷

The Petroyuan Signal

The most significant long-term implication from China's position may not be energy security. It may be monetary. Iran has floated the idea of conditioning tanker passage through Hormuz on oil cargoes being traded in Chinese yuan rather than U.S. dollars. No formal agreement has been signed as of late March, and Chinese analysts are publicly urging caution.⁷ But the signal was enough for Deutsche Bank to publish an analysis Bloomberg headlined as: "Iran War Could Be Making of the Petroyuan."⁹

China's CIPS (Cross-Border Interbank Payment System) processed the equivalent of $25 trillion (approx. 180 trillion yuan) in yuan-denominated transactions in 2025, up 43% year-over-year.¹¹ The infrastructure to handle a shift is being built. What's happening now in the Strait is not a formal policy change. It is the first time in 52 years that a major oil-producing region has had a credible mechanism to condition access on non-dollar settlement. Even if the arrangement dissolves when the war ends, the precedent has been set.¹⁰

Any erosion of the petrodollar arrangement raises the long-run cost of American deficit financing. Whether that materializes over 5 years or 25 depends on how durable the arrangement becomes. For now, China is watching carefully and letting the crisis do the work.

Longer term, the war is also accelerating Beijing's energy diversification. A $1.8 billion agreement involving Chinese firm Sungrow and Norwegian partner Scatec covers solar and battery storage manufacturing in Egypt, positioning North Africa as a renewable energy and logistics node within China's African strategy. The conflict in the Gulf is giving China geopolitical cover to accelerate supply chain moves it was already planning.¹²

Perhaps most significantly, a protracted U.S. military commitment in the Middle East diverts resources and attention away from the Indo-Pacific, with potentially major consequences for Taiwan and the South China Sea. China is gaining strategic breathing room without spending a dollar on it.⁶

On the first trading day after Operation Epic Fury launched, the market delivered an unambiguous verdict. Northrop Grumman and Palantir each climbed roughly 6%. RTX gained close to 5.5%. Lockheed Martin closed at an all-time high of $676.70. The combined market cap of America's five largest defense contractors surged more than $200 billion through the first week of conflict.¹³, ¹⁴

The longer arc is even more instructive. The iShares U.S. Aerospace and Defense ETF returned 58.49% in the trailing year through March 27. RTX traded from a 52-week low of $112.27 to a high of $214.50, roughly doubling from its April 2025 trough. By the time Operation Epic Fury launched, the market had already been pricing in escalation for nine months.¹⁴

The contracts are already flowing. In February, Raytheon entered five framework agreements with the Pentagon to expand production of Tomahawk cruise missiles, AMRAAM, SM-6, and SM-3 interceptors, with production targets growing at 2 to 4 times current rates and a goal of over 1,000 Tomahawks per year.¹⁵, ¹⁶ In January, Lockheed signed a framework to quadruple THAAD interceptor production from 96 to 400 per year, at $12.77 million per unit.¹⁷

The question of who is winning the Iran war depends entirely on the unit of analysis. Militarily, the U.S.-Israel coalition has inflicted serious damage on Iran's leadership and defenses. Economically, the answer is more uncomfortable.

Russia received a budget lifeline it desperately needed. China gained preferential energy access, strategic breathing room in the Indo-Pacific, and a crisis that is accelerating both its renewable energy diversification and the early stages of a yuan-denominated oil trade system that could, over time, structurally reduce global demand for dollars. U.S. defense contractors saw their shareholders collect hundreds of billions in market cap, with multi-year production contracts now locked in at scale.

Iran's closing of the Strait of Hormuz transformed a regional military campaign into a global economic event. One month in, perhaps only one outcome is certain: immense and compounding damage to the global economy, distributed most heavily onto the very countries that neither planned nor participated in this war.